The President’s FY2011 budget proposal triples funding to the Department of Energy Loan Guarantee Program. This includes $36 billion in new budget authority for Treasury-backed loan guarantees to the nuclear industry and $3-5 billion in loan guarantee authority for renewable and energy efficiency projects. The DOE Loan Guarantee program currently has more than $50 billion in loan guarantee authority, $18.5 billion of which is earmarked for nuclear reactors, bringing the total available to nuclear reactors up to $54.5 billion. With tens of billions of dollars in guarantee authority already available, providing the DOE with billions in additional loan guarantee authority is nothing more than a needless giveaway to the nuclear industry that puts billions of taxpayer dollars on the line.
The Loan Guarantee Program presents enormous risks to taxpayers. The program currently allows DOE to guarantee a loan for up to 80% of a project’s costs, placing far more of the financial burden of the project on taxpayers than other project creditors. It also jeopardizes taxpayers’ ability to recoup lost assets if a project defaults on their loan. In fact, just last fall, one key taxpayer protection was eliminated , when the DOE stripped the requirement that taxpayers maintain the right to first lien on project assets in the event of a loan default. With $54.5 billion in loan guarantees for nuclear reactors that could spell billions in losses—because nuclear reactors have been estimated to have a 50% default rate!
On top of the risks associated with nuclear reactors overall, the top four contenders for nuclear loan guarantees are in financial trouble and construction hasn’t even begun. With the country’s hands already full bailing out other industries, throwing money at projects that aren’t ready for prime time is just fiscally reckless.
For more information, please contact Autumn Hanna at (202) 546-8500 x112 or autumn [at] taxpayer.net.
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